RBS shares sag 4 percent after CEO Hester goes

Royal Bank of Scotland shares fell more than 4 percent on Thursday as investors said the surprise exit of Chief Executive Stephen Hester was a big loss and there was no obvious successor.

RBS said late on Wednesday Hester will step down by the end of this year. Its board decided it wanted new leadership to oversee the sale of Britain's majority stake in the bank, which could take years.

Hester had done a good job and it will be tough to find a replacement, although the news did signal Britain's Treasury backed the decision and is on track to start selling its shares next year, analysts and investors said.

"CEO Hester is well respected and has arguably done as good a job as possible in very trying circumstances, given the difficult political and regulatory backdrop and the external pressures often placed on the bank," said Andrew Coombs, analyst at Citi. "His departure will be a loss, in our view, although we understand his reasoning."

By 0705 GMT RBS shares were down 4.5 percent at 311.35 pence, underforming a 2 percent fall in the DJ STOXX Europe bank index <.SX7P>.

RBS also said it will further shrink its investment bank, which a source said will result in 2,000 more job cuts.

(Reporting by Steve Slater; Editing by Matt Scuffham)